Q&A: Hans Ulrich Stoef

***Hans Ulrich Stoef***As its motto, “made for entertainment,” states, m4e AG is dedicated to the development, establishment and marketing of brands and characters. Its divisions include the Dutch producer and distributor of children’s properties Telescreen B.V. m4e focuses primarily on movie and TV production and worldwide distribution, the exploitation of home-entertainment rights, licensing and merchandising, publishing, interactive and new media. CEO Hans Ulrich Stoef talks about the strengths of m4e’s properties.

TV KIDS: What has been the strategy behind m4e’s expansion?
STOEF: We wanted to start a brand-management and brand-building company in the German market, which controls all rights from the very beginning of the value-added chain to the very last stage, combining our know-how from the consumer-products side with our know-how from the entertainment side. At that time, we noticed a tendency for consolidation and the need to go new ways in order to be able to finance new shows. We hadn’t seen any company in Germany that was doing this. It used to be EM.TV in the old days, which is now Studio 100, and as a matter of fact, it is not a German company anymore. Other competitors such as Your Family Entertainment or some others only control parts of the value-added chain, but not the full distribution chain.

As part of the strategy, we acquired Telescreen B.V. to become our international-distribution arm for television and home entertainment as well as our program development-and-production branch. Telescreen already had a consolidated television library for the international market and we wanted to have access to that. On top of that, we expanded our activities in order to have a broader reach with our programming and a wider portfolio with the acquisition of the TV-Loonland back catalogue.

And last but not least, in 2007 we also acquired a successful and well-distributed apparel and accessories company in Germany called Tex-ass, which is located in Essen. Via this company, we are now in the position to not only license to third parties, but also, if needed, to manufacture garments and products for our own needs and get a program started.

TV KIDS: What sort of products and brands do retailers look for these days?
STOEF: Right now retailers are not dedicating more shelf space to kids and youth product lines. So [the challenge is] to get enough attention to your new property so that the retailers will shift over shelf space from a property they already have to your property instead. Thus, you need to create a certain demand, which means you have to do B-to-B advertising as well as B-to-C, all at the same time. Of course, television exposure is important, but as we all know, it’s not enough. At the same time you have to create awareness online and find additional ways via multiplatform business and you have to synchronize it all in order to attract the consumer.

TV KIDS: The business is more complicated than it was 10 or 15 years ago.
STOEF: It’s much, much more complicated, but broadcasters are still open to new creative and diversified quality content. We are not investing in what we call mass-market kids’ programming. We prefer to do a little less in terms of ***Mia and Me***production output and rather spend more money for high-quality content. That is what you can see in Mia and Me, which has a production budget of between $11 million and $12.5 million for 26 episodes. That’s quite a high budget. Even if we acquire third-party properties, which we handle as a worldwide television distributor and licensing agent, we believe in certain values of these properties.

TV KIDS: Nowadays to reach that kind of budget, co-production is essential, isn’t it?
STOEF: Co-production is essential and you can share risks and at the same time benefit from certain creative strengths. But realistically the TV license fees do not allow you to recoup your investment for high-quality content via television or even home video only—it will never work out for these kinds of budgets. If you have such a high budget you need to make the consumer-products part work, otherwise you will lose money. That’s how bad it is in that business. And that’s why we believe we have a huge advantage compared to other companies, because we do everything from one single source.

TV KIDS: As you look at the licensing business, what are the major challenges and opportunities that you see in the next 12 months?
STOEF: The major opportunities are that when you are able to create a hit, you still can make a lot of money with it—that’s for sure. Of course the flop rate—as we call it—is still very, very high; nobody ever gives you a guarantee that your show will be accepted by kids and parents around the world, and as a result you need very strong risk management.

We think the nature of this business with new digital platforms is that license fees certainly won’t go up over the next few years. We will have to do more work in administration in order to secure the same amount of money to put us in a position to produce, and all the while we are up against the majors.

Nevertheless, if you are in the niche business and if you can sustain and maybe even grow your presence, it could very well be that with new possibilities, including doing your own IPTV channels, you can be one of the winners of consolidation within the tough market conditions we are facing right now, and if so, you will grow your business big time.